Repsol, Shell Sign $4.3B Iran Gas Contract

State-owned National Iranian Oil Co. late Saturday signed a $4.3 billion deal with Spain's Repsol YPF S.A. (REP) and Royal Dutch Shell PLC (RDSA) on the upstream development of phases 13 and 14 of the South Pars gas field in the Persian Gulf, state-run radio reported Sunday.

"The agreement is part of a bigger project estimated at $12 (billion) to $13 billion," said Nosratollah Seifi, managing director of the National Iranian Gas Export Co., which signed the deal on behalf of NIOC.

"We hope to sign the remaining parts of the agreement, that will complete this chain, within a year at the latest," said Seifi, referring to the construction of a liquefied natural gas plant that will receive the gas produced.

The two phases will have a combined production of 3 billion cubic feet of sour gas a day and 110,000 barrels of condensates a day when developed, Seifi said. The whole project will be completed in five years' time.

When operational the gas will be delivered to the onshore LNG plant that is hoped would open the door for the export of Iranian LNG to overseas buyers, he said.

The Oil Ministry's information network quoted Gholam-Hussein Nozari, the managing director of the NIOC, as saying that the upstream development of the two phases with the European consortium will be done on buyback basis. Nozari said the cost of the development of the downstream part of the project - the construction of an LNG plant - has been estimated at $5 billion-$6 billion. It is expected to be signed in late 2007 with the two companies.

With 27 trillion cubic meters, Iran owns the second largest reserves of natural gas in the world, after Russia. Almost half of Iran's natural gas lies in the South Pars gas field in the Persian Gulf, jointly shared by Qatar, which is already exporting large quantities of gas from the joint reservoir. Iran is hoping to begin the export of its LNG tentatively by the year 2009, with China and India as initial destinations.